George Soros Says Germany Must Change Course on Euro Crisis

In an Spiegel Online interview, George Soros says that as an investor he would be very pessimistic, especially about Europe and warns that Germany could develop into a hated, imperial power.

On whether return to the deutschmark would be cheaper for Germany:

There is no question that a breakup of the euro would be very damaging, very costly, both financially and politically. And the biggest loss would be incurred by Germany. Germans have to bear in mind that, effectively, they have suffered practically no losses so far. Transfers have all been in the form of loans, and it is only when the loans are not repaid that real losses will be incurred.

On doing the minimum to maintain euro zone:

Doing the minimum, though, will perpetuate the situation where the debtor countries in Europe have to pay tremendous premiums to refinance their debt. The result will be a Europe in which Germany is seen as an imperial power that will not be loved and admired by the rest of Europe — but hated and resisted, because it will perceived as an oppressive power.

On whose fault it is:

This is the joint responsibility of everyone who was involved in the introduction of the euro without understanding the consequences.

Who benefited the most:

Germans tend to forget now that the euro was largely a Franco-German creation. No country has benefited more from the euro than Germany, both politically and economically.

On Marshall Plan after World War II:

Then, America became the center of this system, and the dollar became the dominant global currency. It was a free world dominated by America. But America earned that position by providing huge funds for the reconstruction of Europe through the Marshall Plan. America became a benevolent imperial power, which greatly benefited America.

And parallel to today’s Germany:

Germany is in a similar position today, but it is not willing to engage in anything like the Marshall Plan. It is opposed to any transfer union for the rest of Europe.

On the key problem:

The key problem is the debt restructuring in the euro zone. As long as the debt burden is not reduced, there is no chance of the weaker EU countries regaining competitiveness.

His proposed solution:

I propose a European Fiscal Authority which, in partnership with the European Central Bank (ECB), can do what the ECB cannot do on its own. It could establish a Debt Reduction Fund, similar to that proposed by Chancellor Merkel’s Council of Economic Advisors and endorsed by the Social Democrats and the Greens. In return for Italy and Spain undertaking specified structural reforms, the Fund would acquire and hold a significant portion of their outstanding stock of debt.

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